The motor insurance industry is raising the cost of premiums to "boost profitability" in the wake of the economic downturn, Minister for Transport Paschal Donohoe has been advised by officials.
A briefing document, released under the Freedom of Information Act, shows scepticism within the Department of Transport about industry claims that premiums are rising because of rising compensation awards.
Examining the evidence of awards from the courts, the document says “motor insurers are now imposing higher premium rates to return themselves to profitability or to boost profitability after a number of years of insurers competing for market share, with prices driven down”.
Addressing the broader state of the market, it adds: “The question does arise for motor insurers – if motor insurance is so unprofitable why does anybody do it?”
The position is contained in a briefing memo to Mr Donohoe ahead of a speech to the industry sector last year.
It sets out contradictory positions on activity associated with insurance claims, related costs and how successfully the issues are being dealt with.
According to the Central Statistics Office (CSO), the cost of motor insurance cover had risen 24 per in the year to August 2015.
In the face of a substantial consumer problem, the sector has pointed to the "excessive cost" of claims in Ireland, noting in particular the cost of whiplash at over €10,000 more per individual case than in the UK.
Solicitors
According to insurers quoted in the memo, “the average motor injury award made by the Injuries Board is very high at approximately €21,000”.
“Also, more than 90 per cent of claimants to the Injuries Board are represented by solicitors even though the Injuries Board was meant to be a lawyer-free zone.”
Many consumers have experienced double-digit rises in insurance costs, the document states, for a variety of reasons cited by the companies including underpricing, fraud, drops in investment income, the cost of settling claims and increases in awards due to a change in court jurisdictions.
However, it continues, data from the Injuries Board to the end of last September “paints a somewhat different picture” from that set out by industry.
Courts Service figures show personal injury claims initiated through the courts dropped in 2014 for the first time in seven years.
The number of awards dropped from 1,699 in 2013 to 1,527 the following year.
New claims
The Injuries Board showed a “modest” 8 per cent increase in new claims for 18 months to the middle of last year, while in a 10-year period from its establishment in 2004 “70 per cent of personal injury claims are no longer litigated”.
Speaking last September, the board's interim chief executive Maurice Priestly said a "modest" increase in the number of claims was unsurprising in the recent economic upturn and the associated rise in activity.
“However, what we are seeing are insurance premia increases in the region of 20 per cent, and further clarity is needed on the precise cause of increases of this scale.”
Addressing rising premium costs in the Dáil last month, Minister for Finance Michael Noonan said he had been advised by the Central Bank that “recent premium increases are designed to restore core underwriting profitability and to secure the financial position of the firms concerned for the longer term”.
The AA’s latest survey of members shows that the cost of insurance was a bigger cause of concern among car owners than road safety or other motoring issues.
AA director of consumer affairs Conor Faughnan said: “We have seen an increase of almost 40 per cent in under as little as 24 months which the AA regards as an unacceptable burden on motorists.”
